Maine Revenue Services Corporate Income Tax

IMPORTANT UPDATE

NOTE: The instructions you are looking for begin on the next page.

Tax Year 2018: Note the following changes relative to conformity/nonconformity with federal tax law changes made after December 31, 2019. Follow the form instructions for each item listed below to properly file or amend your Maine return.

Qualified Improvement Property (QIP) – Conformity: • Form 1120ME, line 4h – federal bonus depreciation add-back, if applicable. • Form 1120ME, line 4i – The 2018 Additional Worksheet to Report Certain “Other” Modifications to Maine Income Related to Federal Tax Law Changes Enacted after December 31, 2019, has been eliminated as a result of Maine conformity with federal depreciation of QIP. MAINE CORPORATE INCOME TAX 2018 FORM 1120ME INSTRUCTIONS New fi ling deadline for certain corporations: See this and other important tax law changes at www.maine.gov/revenue

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QUESTIONS?

C Corporation 207-624-9670 Email: [email protected] S Corporation, Partnership 207-624-9670 Email: [email protected] Individual 207-626-8475 Email: [email protected] Withholding Tax 207-626-8475 Email: [email protected] Sales Tax 207-624-9693 Email: [email protected] To order forms 207-624-7894 For general information and downloadable forms, visit our website www.maine.gov/revenue. Tax Fraud Hotline: 207-624-9600 Call this number or send an email to [email protected] to report possible tax violations, including failure to fi le tax returns, failure to report all income and failure to register for tax fi ling.

NOTICE - MARCH 2021 See the revised instructions: • Form 1120ME, lines 2f, 4g, 4h, and 4i on pages 5 and 7; and • Form 1120ME, Schedule C, line 1f on page 10.

MAINE REVENUE SERVICES MISSION STATEMENT The mission of Maine Revenue Services is to serve the citizens of Maine by administering the tax laws of the State eff ectively and professionally in order to provide the revenues necessary to support Maine government. To accomplish this mission, we will: • Foster voluntary compliance with the tax laws by providing clear, complete, accurate, and timely guidance to taxpayers to help them understand and meet their responsibilities under the law. • Maintain the highest standards of integrity, fairness, confi dentiality and courtesy in everything we do.

MAINE REVENUE SERVICES PRIVACY POLICY Maine Revenue Services (“MRS”) of official duties. In addition, MRS subject to the general confi dentiality maintains the highest standards in employees and agents are prohibited and public inspection provisions of handling personally identifi able taxpayer from disclosing tax information to Maine’s “Freedom of Access” laws. information. Taxpayers have the right anyone other than the taxpayer except When confi dential taxpayer information to know what information is kept on in a limited number of very specific is stored by MRS, it is kept in a secure file about them, to have reasonable circumstances. No unassociated location where it is accessible only access to it, and to receive a copy third parties may receive information to authorized employees and agents of their file. Under penalty of law, pertaining to tax returns without written of MRS. If you have any questions employees and agents of MRS are permission from the aff ected taxpayer regarding the Privacy Policy, please prohibited from willfully inspecting except as allowed under 36 M.R.S. § contact MRS at (207) 626-8475. information contained on any tax return 191. Communications that do not meet for any purpose other than the conduct the definition of tax information are 1 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME CORPORATIONS REQUIRED TO FILE CORPORATIONS SUBJECT TO INCOME TAX: Every entity 2. The solicitation of orders for the sale or provision of subject to tax as a corporation (including exempt organizations services, either alone or in combination with the solicitation with unrelated business income and captive insurance companies) of orders for tangible property. Some examples of the must fi le Form 1120ME and pay the applicable Maine corporate combined sale of services and tangible personal property income tax if it meets the following criteria: are photographic development and the provision of architectural or engineering services; and 1. The entity is required to fi le a federal corporate or unrelated 3. The solicitation of orders for the sale, lease, rental, license business income tax return; and or other disposition of real property or intangibles. 2. The entity realizes Maine net income. b. De Minimis Activities. Non-solicitation business activities Maine Net Income. Maine net income is the taxpayer’s federal conducted by a corporation in Maine will not subject the corporation taxable income modifi ed by Maine law and apportionable to Maine. to taxation if the activities, taken together, are de minimis. A corporation is subject to tax if the business has nexus with Maine. For additional information, see MRS Rule 808 at: www.maine.gov/ NEXUS: Nexus refers to a suffi cient connection with a jurisdiction revenue/rules. to subject the corporation to taxation. Nexus is generally created by owning or using property, or by conducting business within the CORPORATIONS NOT SUBJECT TO MAINE CORPORATE taxing jurisdiction. For additional information, see MRS Rule 808 INCOME TAX: The following corporations are not subject to Maine at www.maine.gov/revenue/rules. corporate income tax:

Conducting Business in Maine. Without limitation, a corporation 1. S corporations (except those with federal taxable income conducts business in Maine if it engages in any of the following at the corporate level, see instructions below); activities in this state: 2. Insurance companies that are subject to, or would be subject to, tax under 36 M.R.S. §§ 2512 - 2528 (insurance 1. Maintains an offi ce or other place of business; premiums tax, and fi re investigation and prevention tax), 2. Executes a contract; except insurance companies that operate HMOs and 3. Exercises or enforces contract rights; captive insurance companies (see 36 M.R.S. §§ 5102(6) 4. Buys, sells or procures services or property; or and 5202-C); 5. Employs labor. 3. Banking institutions subject to the Maine franchise tax (see b below); and Owning or Using Property. Without limitation, a corporation owns 4. Corporate small business investment companies, or uses property in Maine if it: licensed under the United States Small Business Investment Act of 1958 that are commercially domiciled in 1. Owns property that is held by another person in this state Maine and do business primarily in Maine. under a lease, consignment or other arrangement; 2. Uses in this state property that it holds under a lease, a. Limited Liability Companies. Maine law allows for the license or other arrangement; or formation of limited liability companies (“LLCs”). A domestic LLC or 3. Maintains a stock of goods in this state. foreign LLC doing business in Maine is classifi ed as a partnership for Maine income tax purposes, unless classifi ed otherwise for Exception for Certain Activities under U.S. Public Law 86-272. federal income tax purposes, in which case the LLC is classifi ed in A foreign corporation that does business in Maine or owns or uses the same manner for Maine income tax as for federal income tax property in Maine is not subject to Maine income tax if its only purposes. activities in Maine are those set forth as exempt in U.S. P.L. 86-272 (15 U.S.C. §§ 381-384). b. Banking Institutions Subject to the Maine Franchise Tax. Every corporation that is a fi nancial institution (except a a. Solicitation Activities. P.L. 86-272 precludes Maine credit union), any service corporation or subsidiary as defi ned in from imposing a tax on the income of a foreign corporation if the 9-B M.R.S. § 131 and any fi nancial institution holding company sole activity of the corporation in this state is the solicitation by that is doing business in this state must fi le Form 1120B-ME and the corporation’s representatives (in the name of the corporation pay Maine franchise tax. This requirement also applies to any or in the name of a prospective customer) of orders for the sale fi nancial institution organized as an S corporation, partnership or of tangible personal property, provided that the orders are sent entity disregarded as separate from its owner. Do not use Form outside of Maine for approval or rejection, and provided that the 1120ME. Franchise tax Form 1120B-ME and instructions are orders are fi lled by shipment or delivery outside of Maine. available at: www.maine.gov/revenue/forms.

Limitations. P.L. 86-272 restricts a state’s tax jurisdiction with FILING REQUIREMENTS FOR S CORPORATIONS: S respect to sales solicitation activities only if the taxpayer’s activity corporations that incur federal taxable income (such as certain is limited to solicitation of orders for the sale of tangible personal capital gains and certain built-in gains) at the corporate level are property. P.L. 86-272 does not aff ord protection in any of the required to fi le Form 1120ME and report only the income that is following circumstances: taxed at the corporate level for federal purposes.

1. A combination of solicitation activities and non-solicitation activities in Maine;

2 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME GENERAL INSTRUCTIONS Maine Revenue Services uses optical scanners to process Form Penalty for insuffi cient funds. The penalty for insuffi cient funds 1120ME and applicable schedules. Forms and schedules cannot also applies to electronic funds transfers. The penalty is $20 or 1% be altered in any way; changes cannot be detected when scanned. of the payment amount, whichever is greater. Any box left blank will be read as zero. Do not use the null sign (Ø). 5. INTEREST: For calendar year 2019, the interest rate is 6%, 1. DATE FOR FILING RETURN: Corporations reporting for compounded monthly. The interest will be added to the balance of calendar year 2018 are required to fi le, with payment, on or before any tax due from the original due date to the date of payment and April 17, 2019. Generally, fi scal year taxpayers are required to fi le, should be included with any payment. with payment, on or before the 15th day of the fourth month following the close of the entity’s taxable year. However, taxpayers with a 6. PENALTIES: fi scal year ending June 30th are required to fi le by September 16th. a. Underpayment of estimated tax penalty. For calendar year 2018, the penalty is 6%, compounded monthly. The penalty rate Tax exempt entities with unrelated business income fi ling federal for calendar year 2019 is 6%, compounded monthly. The penalty Form 990-T are required to fi le and pay by the 15th day of the fi fth will be assessed if the required quarterly installment payments are month following the close of the taxable year. not made. The sum of quarterly estimated tax payments must be 2. EXTENSIONS FOR FILING: A Maine extension request form is at least equal to the lesser of the previous year’s Maine income tax not required. If a taxpayer is unable to fi le by the original due date liability or 90% of the tax liability for the current year. Exception: of the return, Maine allows an automatic six-month extension of time certain large corporations cannot use the previous year’s liability in determining the required amount of estimated tax payments. See to fi le. instructions for Form 1120ES-ME. CAUTION: An extension to fi le a Maine return is not an extension b. Late fi ling and late payment penalties. If a past due to pay any tax due. The automatic extension is only eff ective if return is fi led before the receipt, or within 60 days of the receipt, of the return is fi led within the six-month extension period. a demand notice, the penalty for failure to fi le is the greater of $25 or 10% of the amount of tax due. If the return is fi led more than 60 If tax is due, the taxpayer must pay at least 90% of that amount days after the receipt of a demand notice, the failure-to-fi le penalty by the original due date for fi ling the return. The remaining amount increases to the greater of $25 or 25% of the amount of tax due. due must be remitted with the return by the extended due date to For failure to pay a tax liability, the penalty is 1% of the tax avoid the failure-to-pay penalty. Interest will be charged on any tax liability for each month the payment is delinquent, up to a maximum paid after the original due date of the return. of 25%. c. Other penalties. The law also provides for penalties for Remit any estimated tax with the Maine Extension Tax Payment substantial understatement of tax, negligence, fraud and for payment Voucher for Corporations (Form 1120EXT-ME) by the original due of tax by check that is returned for insuffi cient funds. date for fi ling the Maine return to: Maine Revenue Services, P.O. Box 9101, Augusta, ME 04332-9101. 7. ACCOUNTING PERIOD COVERED BY RETURN: The taxpayer’s Maine return covers the same accounting period as the 3. PAYMENT OF CORPORATE INCOME TAX: All corporations federal corporate return. If the taxable years of the members of a subject to income taxes must make payments of estimated tax unitary business group diff er, see the instructions for Form CR titled unless the liability for the current taxable year or for the prior tax “Diff ering Year-End Dates.” year reduced by allowable credits is less than $1,000. A unitary business that will be fi ling a single return must make payments, 8. ACCOUNTING METHODS: A taxpayer’s accounting method including estimated payments under the corporate name and FEIN for Maine income tax purposes must be the same as that used for of the corporation that will be fi ling Form 1120ME for the year. federal income tax purposes. Equal installments of estimated tax are due throughout the tax year. Payments can be made electronically or download Form 1120ES- 9. ADDITIONAL INFORMATION AND FORMS TO ACCOMPANY ME at www.maine.gov/revenue/forms or call 207-624-7894. STATE RETURN: 4. ELECTRONIC PAYMENTS: Any person with a combined tax NOTE: Due to scanner requirements, supporting documents must liability to Maine of $10,000 or more for all tax types during the be submitted on paper -- disks will be destroyed. most recent lookback period ending during the prior calendar a. The Maine corporate return must be accompanied by a year is required to remit all Maine tax payments electronically legible copy of the corporation’s federal return, Form 1120, pages using Maine EZ Pay, ACH debit or ACH credit method. 1 through 6, for the same taxable period. If the corporation is a Maine EZ Pay is a web-based payment system available on the member of a federal consolidation, the federal return, Consolidated Maine Revenue Services website. EZ Pay also allows payments Form 1120, pages 1 through 6, must be provided. to be scheduled in advance to be automatically withdrawn on the date selected. ACH debit payments may be made by including the b. Corporations subject to Maine corporate income tax that are taxpayer’s banking information with an electronically fi led return. members of an affi liated group as defi ned under 36 M.R.S. § 5102(1- In addition, the teledebit system allows ACH debit payments to be B), and operating in a unitary business, must complete and attach made over the telephone regardless of how a return is fi led. The Form CR, along with an affi liation schedule. Exempt organizations ACH credit system allows taxpayers to contact their bank and initiate fi ling the Maine corporate return, Form 1120ME, must attach a a payment to MRS. ACH teledebit and ACH credit payments require legible copy of the corporation’s federal return, Form 990T. pre-registration with MRS. c. Corporations that own interests in pass-through entities To obtain an ACH teledebit or ACH credit application, a copy of Rule should check the appropriate box on page 1 of Form 1120ME and 102 - Electronic Funds Transfer, or for more information, go to www. provide the EIN of the related pass-through entity. If more than one maine.gov/revenue, call 207- 624-5625 or write: EFT Unit, Maine pass-through entity is owned by the corporation, attach an additional Revenue Services, PO Box 1060, Augusta, ME 04332-1060. sheet listing each pass-through entity and EIN. Penalty for failure to pay by electronic funds transfer. Any person required to pay by electronic funds transfer who fails to do so is liable for a penalty equal to the lesser of 5% of the tax due or $5,000. 3 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME GENERAL INSTRUCTIONS - cont. 10. FEDERAL AUDIT CHANGES AND AMENDED RETURNS: 11. MAINE SALES AND USE TAX INFORMATION: Taxable items A taxpayer must fi le a Maine amended return within 180 days after bought from out-of-state sellers that do not collect Maine sales tax fi nal determination of any change or correction by the Internal of at least 5.5% are subject to a use tax. The use tax equals 5.5% Revenue Service to federal taxable income. Attach a copy of the of the purchase price where no sales tax has been paid. If another Internal Revenue Agent’s report with all supporting schedules to state’s sales or use tax has been paid on any purchase, that amount amended Form 1120ME and complete Schedule X. may be credited against the Maine use tax due on that purchase. There is no use tax liability if the purchase would have been exempt A taxpayer fi ling an amended federal income tax return must, if purchased in Maine. If registered for sales/use tax purposes, within 180 days, fi le an amended Maine income tax return with a report the purchases on the applicable “Other Taxable Purchases” copy of federal Form 1120X. When fi ling a return that refl ects a line of that return. Call 207-624-9693 for more information about federal net operating loss carryback, a copy of federal Form 1139 Maine Use Tax Law. must be attached. 12. OVERPAYMENT OFFSETS: Maine Revenue Services will In addition, an amended Maine income tax return is required off set tax overpayments, including those designated to be carried to correct errors on a previously fi led return. The amended return forward, in order to satisfy an existing debt with MRS or any other must be fi led within 180 days of the discovery of the error. state agency. When fi ling an amended Maine corporate income tax return, Schedule X must be completed to report any change on Form 1120ME or associated schedules. SPECIFIC INSTRUCTIONS NOTE: Use whole dollar amounts. Round down to the next lower NOTE: For S corporations, enter the corporate level federal taxable dollar any amount less than 50 cents. Round up to the next higher income. Corporations that are members of an affi liated unitary dollar any amount 50 cents or more. business group should refer to the combined reporting instructions. A corporation that has nexus with Maine and is an affi liate in a federal ENTITY INFORMATION: Print or type the entity’s name and current consolidated fi ling, but not a member of a unitary business group, mailing address in the spaces provided. Provide current contact must enter federal taxable income that is solely attributable to the information in case MRS must contact you with questions regarding corporation. this fi ling. SUBTRACTIONS AMENDED RETURN: Check Box 2 if this is an amended return. Line 2a. NONTAXABLE INTEREST: Enter interest on U.S. bonds, Complete each line on Form 1120ME and all applicable schedules, U.S. Treasury notes or other obligations of the U.S. government even if the information is not changing from the original return or as which, by law, are exempt from state taxes, but taxable by the most recently adjusted. Complete Schedule X to provide information federal government. Include interest from bonds issued by the State about what you are amending. Instructions for Schedule X are on of Maine or Maine municipalities and interest from bonds issued page 11. by an airport authority chartered in accordance with Maine Title 6, Chapter 10, if taxed on the federal return. Enter on this line interest Line A. FEDERAL CONSOLIDATED INCOME: If the federal fi ling income and capital gains from the sale of bonds issued by the Maine was part of a federal consolidated return, enter the amount from Waste Management Agency to the extent included in federal taxable federal Form 1120, line 30 here. income. The amount entered on this line must be reduced by the Line 1. FEDERAL TAXABLE INCOME: Corporations: enter federal amount of expenses attributable to the nontaxable interest income taxable income from line 30 of federal Form 1120. Real Estate and capital gains. Investment Trusts (“REITs”): enter the taxable income amount Line 2b. FOREIGN DIVIDEND GROSS-UP: Enter the amount from from federal Form 1120-REIT, line 22. Homeowners Associations: federal Form 1120, Schedule C, line 18. enter the taxable income from Form 1120-H, line 19. Tax Exempt Organizations: enter the unrelated business taxable income from Line 2c. WORK OPPORTUNITY CREDIT AND EMPOWERMENT Form 990-T, line 38, and check the box in the upper right corner of ZONE CREDIT DEDUCTIONS: Enter on this line the amount of Form 1120ME. salaries and wages expense deduction directly related to claiming the Work Opportunity credit or Empowerment Zone credit. These For amended returns, federal net operating losses, including amounts are reported on federal Form 5884, line 2 or Form 8844, line carrybacks and carryforwards, are refl ected in the federal taxable 2. The amount from Form 8844 will also include wages related to the income reported on line 1. If the Maine amended return being fi led Renewal Community credit. is due to federal NOL carrybacks or carryforwards, a copy of federal Form 1139 or Form 1120X and a schedule that refl ects, from year Line 2d. INCOME NOT TAXABLE UNDER THE CONSTITUTION to year, the use of the federal NOL carryback or carryforward and OF MAINE OR THE U.S.: Enter income this state is prohibited related income modifi cations described below must be attached to the from taxing under the Constitution or laws of the United States or return. A corporation included in a federal consolidated return fi ling the Constitution of the State of Maine, to the extent included in a separate Maine return that carries back a loss for Maine purposes federal taxable income. The amount must not have otherwise been that diff ers from the federal NOL carryback must complete and attach removed from federal taxable income and must be decreased by to the Maine amended return a pro forma federal Form 1139 (or expenses incurred in the production of that income to the extent that similar schedule containing all of the information required by federal the expenses are deductible in determining federal taxable income. Form 1139) to support the amount of NOL deduction being claimed Attach a worksheet detailing the amount claimed on this line. for Maine purposes. Clearly mark the form “Maine pro forma.” If these activities result in a net loss, that amount must be reported on this line. Put a minus sign (-) to the left of the amount to show a For more information on Maine’s treatment of NOLs, see www.maine. loss. Through this subtraction modifi cation, any loss generated from gov/revenue/forms (select Income Tax Guidance Documents). activities Maine is prohibited from taxing will be added back to federal taxable income.

4 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME SPECIFIC INSTRUCTIONS - cont. Line 2e. DIVIDENDS FROM CERTAIN AFFILIATED and Internal Revenue Code, Section 179 expenses are allowed to CORPORATIONS: Enter 50% of all apportionable dividends from be recaptured as follows: affi liated corporations that are not included by the taxpayer in a Maine a. 2011 – 2017 Property. Property placed in service in 2011 and combined report, net of related expenses and deductions deducted later is not subject to a section 179 expense addition modifi cation. in calculating federal taxable income. Dividends must be included in Property placed in service in Maine in 2011 and later for which the federal taxable income, line 1. In order to be affi liated, a corporation Maine capital investment credit was claimed is not eligible for a must be more than 50% owned. Although this may include domestic recapture of the addition modifi cation under 36 M.R.S. §§ 5200-A(1) entities, most affi liated corporations not included in a combined report (Y)(1), 5200-A(1)(AA)(1), 5200-A(1)(BB)(1) and 5200-A(1)(CC)(1). are foreign entities. Addition modifi cations under 36 M.R.S. §§ 5200-A(1)(Y)(2), 5200- Note: This deduction may not be claimed with respect to deferred A(1)(AA)(2), 5200-A(1)(BB)(2) and 5200-A(1)(CC)(2) for property foreign income (Internal Revenue Code, Section 965), subpart F placed in service in 2011-2016 are recaptured beginning in the income (Internal Revenue Code, Section 952) or global intangible year after the property is placed in service. The recapture amounts low-taxed income (Internal Revenue Code, Section 951A). See are equal to the diff erence between the depreciation that would instructions for lines 2k, 2l and 2m below for deductions related to have been claimed for that year if no fi rst-year bonus depreciation this income. had been claimed and the actual federal depreciation claimed for that property. A full recapture of any remaining bonus depreciation Line 2f. NET OPERATING LOSS RECAPTURE: (attach Schedule addition modifi cation is allowed in the year of disposition of the NOL): If the entity has a net operating loss for a tax year ending in asset. 2001 or later that was carried back for federal purposes, but added back to income under 36 M.R.S §§ 5200-A(1)(H) or 5200-A(1)(M), a b. 2008 – 2010 Property. Section 179 expense addition deduction is allowed on this line equal to the amount of the income modifi cations under 36 M.R.S. § 5200-A(1)(N) for property placed addition required for Maine income tax purposes. The deduction must in service in 2008 through 2010 are recaptured over the asset life be within the allowable NOL carryforward period plus the number of of the property. In the year after the property was placed in service, years the carryforward was denied under 36 M.R.S. §§ 5200-A(2)(H) 5% of the related addition modifi cation may be recaptured. The (5) or 5200-A(2)(L)(5). The deduction cannot reduce Maine taxable remaining 95% of the addition modifi cation is recaptured in equal income to less than zero and must not have been previously used as installments over the remaining asset life, beginning two years after a subtraction modifi cation. the property was placed in service. Bonus depreciation addition modifi cations under 36 M.R.S. § 5200-A(1)(T) for property placed If the entity has a net operating loss carryforward that was limited in service in 2008 through 2010 are recaptured in the same manner under 36 M.R.S. § 5200-A(1)(U) for the tax year beginning in 2008 or as for property placed in service in 2011 and 2012. denied under 36 M.R.S. § 5200-A(1)(V) for tax years beginning in 2009 through 2011, a deduction is allowed on this line equal to the amount c. 2007 Property. Section 179 expense addition modifi cations of the income addition required for Maine income tax purposes. The under 36 M.R.S. § 5200-A(1)(N) for property placed in service in deduction must be within the allowable NOL carryforward period plus 2007 are recaptured over the asset life of the property. In the the number of years the carryforward was limited or denied under year after the property was placed in service, 5% of the related 36 M.R.S. §§ 5200-A(1)(U) or 5200-A(1)(V) and 5200-A(2)(T). The addition modifi cation may be recaptured. The remaining 95% of deduction cannot reduce Maine taxable income to less than zero and the addition modifi cation is recaptured in equal installments over must not have been previously used as a subtraction modifi cation. the remaining asset life, beginning two years after the property was placed in service. Property placed in service in 2007 is not subject Note: Net Operating Loss 80% Limitation. Do not include on this to a bonus depreciation addition modifi cation and, therefore, there line any NOL deduction claimed on your 2018 federal income tax is no related recapture. return (original or amended) in accordance with Section 2303 of the federal Coronavirus Aid, Relief, and Economic Security (CARES) d. 2003 – 2006 Property. Section 179 expense and/or bonus Act. depreciation addition modifi cations under 36 M.R.S. § 5200- A(1)(N) for property placed in service in 2003 through 2006 are For more information and examples, go to www.maine.gov/ recaptured in the same manner as for property placed in service in revenue/incomeestate and select Guidance Documents. 2008 through 2010. Line 2g. INCOME FROM OWNERSHIP INTEREST IN PASS- e. 2002 Property. Bonus depreciation addition modifi cations THROUGH ENTITY FINANCIAL INSTITUTIONS: Financial under 36 M.R.S. § 5200-A(1)(N) for property placed in service in institutions are subject to Maine’s franchise tax, regardless of 2002 are recaptured in equal installments over the asset life of organizational structure. If federal taxable income includes income the property, beginning two years after the property was placed in from ownership of a fi nancial institution that is a pass-through entity service. (partnership, S corporation or an entity disregarded as separate from its owner), enter the income from that fi nancial institution on this line. For more information and examples, visit www.maine.gov/revenue/ Attach federal Schedule K-1 reporting this amount. forms and select Income Tax Guidance Documents. Line 2h. STATE INCOME TAX REFUNDS: Enter the amount of Line 2j. MEDICAL MARIJUANA BUSINESS EXPENSES: state income tax refunds included in federal taxable income, provided Eligible registered caregivers and registered dispensaries may the amount has already been taxed by Maine. This modifi cation claim a deduction for expenses related to carrying on a trade or may not reduce federal taxable income to less than zero, and the business, in an amount equal to the deduction that would otherwise amount refunded from this state or another state must not have be allowable for Maine purposes to the extent the deduction was been previously used as a modifi cation. Any unused portion of the disallowed under Internal Revenue Code, Section 280E. modifi cation may be carried forward 20 years. Line 2k. 50% OF APPORTIONABLE SUBPART F INCOME: To Line 2i. BONUS DEPRECIATION/SECTION 179 EXPENSE the extent included in federal taxable income, enter an amount RECAPTURE: Addition modifi cations under 36 M.R.S. §§ 5200-A(1) equal to 50% of the apportionable subpart F income (as defi ned (N), 5200-A(1)(T), 5200-A(1)(Y)(2), 5200-A(1)(AA)(2), 5200-A(1) by Internal Revenue Code, Section 952), net of related expenses (BB)(2) and 5200-A(1)(CC)(2) relating to federal bonus depreciation and deductions.

This page revised: July 2020 5 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME SPECIFIC INSTRUCTIONS - cont. Line 2l. 80% OF APPORTIONABLE DEFERRED FOREIGN ADDITIONS INCOME: Enter an amount equal to 80% of the apportionable Line 4a. INCOME TAXES IMPOSED BY MAINE OR ANY deferred foreign income (also known as deemed repatriated OTHER STATE: Maine does not permit a deduction for income income or Internal Revenue Code, Section 965 income), to the taxes imposed by Maine or any other state. Enter income taxes extent included in federal gross income under Internal Revenue taken as a deduction on federal Form 1120. However, to the extent Code, Section 965(a) and as reduced by the federal earnings and claimed federally, Maine does not require the addition of the Ohio profi ts defi cit deduction under Internal Revenue Code, Section Commercial Activity Tax, the Texas Franchise Tax, and the portions 965(b). Generally, this will be 80% of federal From 1120, Schedule of the Michigan Business Tax that are not based on income. C, line 15, column a. Line 4b. DEFERRED FOREIGN INCOME: To the extent not Line 2m. 50% OF GLOBAL INTANGIBLE LOW-TAXED included in the federal taxable income amount reported on Form INCOME: Enter the amount equal to 50% of the apportionable 1120ME, line1, enter the corporation’s share of the amount of global intangible low-taxed income that the taxpayer included in federal deferred foreign income determined for the taxable year federal gross income during the taxable year in accordance with in accordance with Internal Revenue Code, Section 965(a), less Internal Revenue Code, Section 951A, net of related expenses and the applicable amount of the earnings and profi ts defi cit deduction other related deductions deducted in computing federal taxable under Internal Revenue Code, Section 965(b). Generally, this is income. Generally, this will be 50% of federal Form 1120, Schedule the amount reported on federal From 1120, Schedule C, line 15, C, line 17. column a. Line 2n. OTHER: Enter on this line the following subtraction NOTE: Unlike federal law, Maine law does not allow an election to modifi cations: pay the Maine tax liability associated with deferred foreign income in annual installments. NORTHERN MAINE TRANSMISSION CORPORATION ADJUSTMENT: Bonds, notes, other evidences of indebtedness; Line 4c. PARTICIPATION EXEMPTION DEDUCTION ADD- interest and profi ts from bonds, notes, other evidences of BACK: Enter the amount of the federal participation exemption indebtedness; and any other income or money of the Northern deduction determined under Internal Revenue Code, Section Maine Transmission Corporation are exempt from state income 965(c) to the extent the amount was deducted in calculating the tax. federal taxable income amount reported on Form 1120ME, line GAIN ON SALE OF MULTIFAMILY AFFORDABLE 1. Generally, this is the amount reported on federal Form 1120, HOUSING: This modifi cation equals the total of capital gains and Schedule C, line 15, column c. ordinary income resulting from depreciation recapture pursuant to Line 4d. GLOBAL INTANGIBLE LOW-TAXED INCOME Internal Revenue Code, Sections 1245 and 1250 realized on the DEDUCTION ADD-BACK: Enter the amount equal to the sale of multifamily aff ordable housing property. Qualifi ed property taxpayer’s global intangible low-taxed income deduction claimed must be certifi ed by the Maine State Housing Authority (“MSHA”). in accordance with Internal Revenue Code, Section 250(a)(1)(B), A copy of the MSHA certifi cate must be attached to the return. to calculate the federal taxable income amount reported on Form DISCHARGE OF INDEBTEDNESS: Enter on this line income 1120ME, line 1. Generally, this is the amount reported on federal recognized at the federal level through the deferral of income Form 8993, Part IV, Line 9. from the discharge of indebtedness claimed as a Maine income Line 4e. INTEREST FROM STATE AND MUNICIPAL BONDS modifi cation in 2009 or 2010. Generally, the recognition of this OTHER THAN MAINE: Corporations must increase federal taxable income was deferred until 2014 for federal tax purposes. In no income by interest or dividends on obligations or securities of any event may the aggregate amount claimed on this line exceed the state other than Maine, or of a political subdivision or authority total addition modifi cations claimed for 2009 and 2010 under 36 of any state other than Maine, to the extent that interest or those M.R.S. § 5200-A(1)(W) related to the deferral under the Internal dividends are not included in the taxpayer’s federal taxable income. Revenue Code, Section 108(i). SEED CAPITAL INVESTMENT TAX CREDIT: Enter on this Line 4f. NET OPERATING LOSS ADJUSTMENT: Enter on this line, to the extent included in federal taxable income, the refundable line an amount equal to any net operating loss (“NOL”) carryforward portion of the seed capital investment tax credit under 36 M.R.S. § deduction claimed in this taxable year which has previously been 5216-B received by, or from, a private venture capital fund. used to off set Maine modifi cations to federal taxable income in accordance with 36 M.R.S. § 5200-A(1). For additional information GAINS FROM SALE ON TIMBERLANDS: This modifi cation concerning the NOL adjustment, see www.maine.gov/revenue/ is equal to a portion of the gain realized on the sale of eligible incomeestate. For information regarding federal NOL carryback on timberlands held by the taxpayer for at least a ten-year period Maine amended returns, see the instructions for line 1 on page 4. beginning on or after January 1, 2005. For property held for 10 years but less than 11 years, the modifi cation is equal to 6 2/3% BONUS DEPRECIATION ADD-BACK. Lines 4g and 4h relate to of the gain. For property held 11 years but less than 12 years, the Maine’s decoupling from the federal special depreciation deduction modifi cation is equal to 13 1/3%. For property held for 12 years but through Internal Revenue Code, Section 168(k), commonly less than 13 years, the modifi cation is equal to 20%. For property known as bonus depreciation. To calculate the amount to enter held for 13 years but less than 14 years, the modifi cation is equal on these lines, complete a pro forma federal Form 4562 as if no to 26 2/3%. The modifi cation is limited to the amount included in bonus depreciation was claimed on the property placed in service federal taxable income and may not reduce Maine taxable income in tax year 2018. The total addition modifi cation is the diff erence to less than zero; however, unused portions may be carried forward between the federal depreciation claimed on Form 4562 and the for up to ten years. 36 M.R.S. § 5200-A(2)(P). depreciation calculated on the pro forma Form 4562. If any of the NEW MARKETS CAPITAL INVESTMENT CREDIT: Enter property placed in service in tax year 2018 is located in Maine and on this line any income recognized from the new markets capital the Maine capital investment credit is claimed, the total addition investment credit under 36 M.R.S. § 5219-HH included in federal modifi cation must be divided between lines 4g and 4h. Otherwise, taxable income. the entire addition must be entered on line 4h. Enclose copies of the original and pro forma federal Forms 4562, along with the add- back calculation, with the return.

6 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME SPECIFIC INSTRUCTIONS - cont. For more information, go to www.maine.gov/revenue and select Line 7a. MAINE CORPORATE INCOME TAX: A corporation that Income Tax Guidance Documents under the Forms, Publications & is not part of an affi liated-unitary business group and has income Applications heading. Also, refer to the instructions for line 2i above. solely from business activity within Maine must enter the amount NOTE: Include on line 4h any accelerated depreciation related from line 6 on line 7a. A corporation having income from within and to qualifi ed improvement property used to reduce federal taxable outside the state must apportion tax on Schedule A and enter on income under the federal CARES Act. this line the amount shown on line 6 of Schedule A. All corporations that are members of a unitary business group must also complete Line 4g. MAINE CAPITAL INVESTMENT CREDIT BONUS Form CR. See instructions for combined reporting on page 12. DEPRECIATION ADD-BACK: The Maine capital investment credit is available to businesses that place depreciable property, except for Line 7b. CREDIT RECAPTURE: Enter sum of recapture amounts from qualifi ed improvement property, in service in Maine during the taxable Seed Capital Investment Tax Credit Worksheet line 12c plus Credit for year beginning in 2018. Enter on this line the portion of the bonus Rehabilitation of Historic Properties Worksheet, Part B, Line 5. depreciation add-back calculated above relating to property for which the Lines 8a and 8b. ESTIMATED AND EXTENSION PAYMENTS: Maine capital investment credit is claimed, based on original basis of Enter estimated tax payments and extension payments made for property placed in service in tax year 2018. For example, if the entity the tax year. If claiming real estate withholding payments on line 8a, purchased $400,000 of eligible property and $100,000 of that property Form REW-1 must be attached. Include on line 8a any overpayment is located in Maine and included in the credit base, the portion of the carried over from previous years and applied to this year. add-back to include on this line is $100,000/$400,000 or 25% of the total Line 8d. INCOME TAX WITHHELD: Enter on line 8d the amount bonus depreciation add-back calculated above. of withholding credited to the corporation through the Maine pass- Property that is transferred out-of state or disposed of within 12 through entity withholding requirement, and/or the amount withheld months after being placed in service in Maine is not eligible for the from certain gambling winnings. The amount claimed on this line Maine capital investment credit. Amounts claimed on this line are must be substantiated by the attachment of a year-end Form 1099ME not eligible for the recapture subtraction modifi cation on line 2i. issued by the pass-through entity, and/or a copy of Form W-2G. Line 4h. BONUS DEPRECIATION ADD-BACK: Enter on this Lines 8e and 8f. Complete these lines only if this is an amended return: line the total bonus depreciation add-back calculated above less 8e. PAYMENTS: enter payment made with the original return and the amount of Maine capital investment credit add-back from line any payments made after the return was fi led. 4g. Amounts entered on this line are eligible for the recapture subtraction modifi cation on line 2i in future years. 8f. OVERPAYMENTS: enter any overpayment on the original return or as previously adjusted. Line 4i. OTHER: Include on this line the following items: LOSSES, EXPENSES OR DEDUCTIONS FROM OWNERSHIP Line 10. PENALTY FOR UNDERPAYMENT OF ESTIMATED INTEREST IN FINANCIAL INSTITUTIONS: All fi nancial institutions TAX: If the estimated tax was underpaid, complete and attach are subject to Maine’s franchise tax, regardless of the entity’s Form 2220ME to this return. A copy of Form 2220ME is available organizational structure. If federal taxable income includes a loss, at: www.maine.gov/revenue/forms. expense or deduction from ownership of a fi nancial institution that Line 13a. AMOUNT OF LINE 12 TO BE CREDITED: Use this is a pass-through entity (partnership, LLC, S corporation or an line only if all or part of the overpayment on line 12 will be applied entity disregarded as separate from its owner), enter the amount as a payment to the next year’s estimated Maine corporate income on this line. Attach federal Schedule K-1 to verify this amount. tax. The payment will be applied to the next year as of the date a WELLNESS PROGRAMS CREDIT ADD-BACK: Federal complete return listing the request was fi led with Maine Revenue taxable income must be increased by the amount of qualifi ed Services. This line may not be used when fi ling a return after the wellness program expenditures used as a basis for calculating statute of limitations date for credits and refunds. the credit under 36 M.R.S. § 5219-FF that are also claimed as a Line 13b. AMOUNT OF LINE 10 TO BE REFUNDED: Enter here business expense in calculating federal taxable income. the diff erence between lines 12 and 13a. Refunds of $1.00 or more MAINE FISHERY INFRASTRUCTURE INVESTMENT TAX will be issued. CREDIT ADD-BACK: The amount claimed as a deduction in A refund may be directly deposited into a checking account (if it is determining federal taxable income that is used to calculate the Maine $20,000 or less). To comply with banking rules, the box to the left Fishery Infrastructure Investment Tax Credit under 36 M.R.S. § 5216-D. of line 13d must be checked if the refund is going to an account Line 6. GROSS TAX: For tax years beginning in 2018, the Maine outside the United States. If the box is checked, we will mail a corporate tax is computed as follows. paper check to the address on fi le. If adjusted federal taxable income is: On line 13c, enter the 9-digit routing transit number (RTN). The RTN must begin with 01 through 12 or 21 through 32. If it does not, the Greater But not direct deposit will be rejected and a refund check will be sent instead. than over The gross tax is: If unsure what the RTN is, contact the taxpayer’s fi nancial institution. $0 $350,000 3.5% of adjusted federal On line 13d, enter the taxpayer’s checking account number. taxable income The checking account number can be up to 17 digits long (both 350,000 1,050,000 $12,250 plus 7.93% of the numbers and letters). Omit hyphens, spaces and special symbols excess over $350,000 IMPORTANT: A return is incomplete and will not be considered a 1,050,000 3,500,000 $67,760 plus 8.33% of the excess over $1,050,000 fi led return unless all required attachements are included and all required lines and schedules (including Form CR) are completed. 3,500,000 or more $271,845 plus 8.93% of the Pages 1 - 5 of the federal return must be attached to the Maine excess over $3,500,000 corporate return.

This page revised March 2021 7 MAINE CORPORATE INCOME TAX - 2018 FORM 1120ME SCHEDULE A - APPORTIONMENT OF TAX GENERAL INSTRUCTIONS Schedule A is for corporations engaged in interstate business. the period represented by adjusted federal taxable income on Form Maine employs a sales-factor formula to determine the percentage 1120ME, line 5. of corporate income tax that is apportioned to Maine. Generally, this percentage is derived from a fraction, the numerator of which “Sales” means all gross receipts including trade sales, dividends, includes the sales in Maine, and the denominator of which includes interest, rents and royalties. See MRS Rule 801.06. Sale of a sales everywhere in the U.S. (36 M.R.S. §§ 5210-5211 and MRS partnership interest by a corporation engaged in multistate business Rule 801). To be included in the sales factor, gross receipts must activity is attributed to Maine to the extent of the ratio of the partnership’s give rise to adjusted federal taxable income included in the tax base. tangible property located in Maine to tangible property located For unitary businesses fi ling a combined report, the sales factor must everywhere, determined based on original cost. Receipts from sales, include all sales of the taxpayer and members of the affl iated group. other than sales of tangible personal property, are generally sourced to Both the numerator and the denominator must exclude certain sales the state of destination. See details under specifi c instructions below. of tangible personal property to a state where the taxpayer is not taxable. Sales are not excluded if any affi liate with which the taxpayer Corporations that are members of a unitary business group, see conducts a unitary business is taxable in that state. Sales to the instructions for combined reporting on page 12. federal government are assigned to Maine and are included in the A corporation that has an ownership interest in a pass-through entity denominator. If the apportionment provisions do not fairly represent must include its share of income and apportionment factor from that the extent of the taxpayer’s business activity in Maine, the taxpayer entity in the apportionment formula. may petition for, or the state tax assessor may require, another method for apportionment of the taxpayer’s income tax. For amended returns, schedule A must be completed, even if the fi gures are not changing from the original, or as previously adjusted, return. “Tax period,” referred to in the instructions for lines 1, 2 and 3, means

SPECIFIC INSTRUCTIONS

MUTUAL FUND SERVICE PROVIDERS may elect to apportion attributed to the state where the services are received. If the state income tax to Maine using a special sales-only formula. Check the where the services are received cannot be readily determined, the box on Schedule A if the entity qualifi es and is making this election. services are deemed to be received at the home of the customer or, The choice is irrevocable for fi ve years. Taxpayers electing this in the case of a business, the offi ce of the customer from which the special apportionment are excluded from combined reporting. 36 services are ordered. If the offi ce from which the services are ordered M.R.S. § 5212. cannot be determined, the services are deemed to be received at the offi ce to which the services are billed. Receipts from services Line 1. TOTAL SALES: The apportionment factor is a fraction, the rendered to the federal government are attributed to Maine if a greater numerator of which includes the total sales of the taxpayer in Maine proportion of the related income-producing activity is performed in during the tax period, and the denominator of which includes the total Maine than in any other state, based on costs of performance. 36 sales of the taxpayer everywhere in the U.S. during the tax period. M.R.S. § 5211(16-A)(A). For unitary businesses fi ling a combined report, the sales factor must include all sales of the taxpayer and members of the affl iated group. Patents, copyrights, trademarks. Receipts from the license, sale Both the numerator and the denominator must exclude certain sales or other disposition of patents, copyrights, trademarks and other of tangible personal property into a state where the taxpayer is not similar property are attributed to the state in which the property is taxable, unless the sales are to the federal government. Sales into used. Receipts are attributed to Maine if the taxpayer’s commercial a state where the taxpayer is not taxable, however, are included if domicile is in Maine and is not taxable in the state in which the property an affi liate with which the taxpayer conducts a unitary business is is used. If the property is used in more than one state, the receipts taxable within that state. associated with the property must be allocated to Maine based on the ratio the property was used in Maine. Receipts from the federal Note: Total sales must exclude income claimed as a deduction on government and receipts attributable to a state in which the taxpayer is Form 1120ME, line 2e (deduction for dividends from certain foreign not taxable are attributed to Maine if a greater proportion of the related affi liates), income claimed as a deduction on Form 1120ME, line 2k income-producing activity is performed in Maine than in any other for 50% of apportionable subpart F income and income claimed as a state, based on costs of performance. 36 M.R.S. § 5211(16-A)(B). deduction on Form 1120ME, line 2l for 80% of apportionable deferred foreign income. Total sales must also exclude the deduction of 50% Real property. Receipts from the sale, lease, rental or other use of the apportionable global intangible low-taxed income claimed of real property are attributed to the state in which the property is on Form 1120ME, line 2m. However, the remaining 50% of the located. 36 M.R.S. § 5211(16-A)(C). apportionable global intangible low-taxed income may, to the extent Tangible personal property. Receipts from the sale of tangible included in federal gross income and net of related expenses and personal property are attributed to Maine if the property is delivered deductions deducted in calculating federal taxable income, be used or shipped to a purchaser, other than the U.S. government, in to calculate the Maine apportionment factor. Maine regardless of F.O.B. point or other conditions of the sale. Sales, other than sales of tangible personal property. Receipts If the purchaser is the U.S. government, receipts from the sale of from sales, other than sales of tangible personal property, are tangible personal property are attributed to Maine if the property is generally attributed to the state where the services are received or shipped from a location in Maine. 36 M.R.S. § 5211(16-A)(D). Both where the property is located. Thus sales, other than sales of tangible the numerator and the denominator must exclude certain sales of personal property, are attributed as follows: tangible personal property to a state where the taxpayer is not taxable. However, sales are not excluded if any affi liate with which the taxpayer Services. Generally, receipts from the performance of services are conducts a unitary business is taxable in that state.

8 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME SCHEDULE A - APPORTIONMENT OF TAX SPECIFIC INSTRUCTIONS - cont.

Financial services. Receipts from fi nancial services are attributed Line 2. TOTAL PAYROLL: Enter in column A total compensation to Maine as follows. 36 M.R.S. §§ 5211(16-A)(E) & 5206-E(2)(C-I). paid in Maine during the tax period by the taxpayer, and enter in column B total compensation paid everywhere during the tax period. Interest (including fees and penalties in the nature of interest) from “Compensation” means wages, salaries, commissions and any other loans located in Maine, determined at the time of original agreement. form of remuneration to employees for personal services, including deferred compensation. Compensation is paid in Maine if: Net gains from the sale of loans attributed to Maine. The net gain attributed to Maine is determined based on the ratio of interest, (1) The individual’s service is performed entirely within this state; fees and penalties from loans located in Maine to interest, fees and penalties from all loans. (2) The individual’s service is performed both within and outside Maine, but the service performed outside the state is incidental Interest (including fees and penalties in the nature of interest) from to the individual’s service within Maine; or credit card receivables and receipts from fees (such as annual fees) charged to credit card holders with billing addresses in Maine. (3) Some of the service is performed in this state, the base of operations (or, if there is no base of operations, the place from Net gains from the sale of credit card receivables attributed to Maine. where the service is directed or controlled) is not in any state in The net gain attributed to Maine is determined based on the ratio of which some part of the service is performed and the individual’s credit card interest, fees and penalties associated with Maine credit residence is in Maine. card holders to all credit card interest, fees and penalties. Payroll for leased and temporary employees. The payroll totals Credit card reimbursement fees attributed to Maine. Credit card must include 85% of amounts paid to an employee-leasing company reimbursement fees, including related payment processing fees, for leased employees and 100% of amounts paid for temporary attributed to Maine are determined based on the ratio of credit card employees. Employee-leasing companies and temporary services interest, fees and penalties associated with Maine credit card holders companies will exclude from payroll compensation paid to leased or to all credit card interest, fees and penalties. temporary employees who are providing personal services to client companies. However, amounts received from clients for leased or Receipts from merchant discount, including related payment temporary employees must still be included in the line 1 apportionment processing fees, are attributed to Maine if the commercial domicile factor calculation of the leasing or temporary services company. of the merchant is in Maine. “Leased employee” means an individual who performs services for Loan servicing fees attributed to Maine. Loan servicing fees attributed a client company pursuant to a contract between the client company to Maine are determined based on the ratio of interest, fees and and an employee-leasing company. penalties from loans located in Maine to interest, fees and penalties from all loans. “Temporary services” means employee services provided to client companies for a contractual period of less than 12 months. Sale of partnership interest. The gain or loss from the sale of a partnership interest is sourced to Maine by multiplying the gain 36 M.R.S. § 5211(12). or loss by the ratio of the original cost of the partnership’s tangible property located in Maine to the original cost of the partnership’s Line 3. TOTAL PROPERTY: Enter in column A the average value tangible property everywhere, determined at the time of the sale. A of the taxpayer’s real and tangible personal property (including diff erent ratio must be calculated if more than 50% of the value of the inventory) owned or rented and used in Maine during the tax period. partnership’s assets consists of intangible property. The foregoing Enter in column B the average value of all the taxpayer’s real and allocation calculations do not apply to certain sales of interests in tangible personal property (including inventory) owned or rented and investment partnerships. 36 M.R.S. §§ 5211(16-A)(F) & 5142(3-A). used during the tax period. Disaster assistance. The numerator of the sales factor excludes Property owned by the taxpayer is valued at original cost. The the receipts of an entity if that entity’s business activity in Maine is average value of the property is determined by averaging the values limited to services provided during a declared disaster at the request at the beginning and end of the tax period, but the state tax assessor of state or local offi cials. 36 M.R.S. § 5211(16-B). may require the averaging of monthly values during the tax period if reasonably required to refl ect properly the average value of the NOTE: Although payroll and property are no longer included in the taxpayer’s property. Property rented by the taxpayer is valued at Maine apportionment factor, this information is still being collected eight times the net annual rental rate. 36 M.R.S. § 5211(9). for a variety of purposes, including for statistical, audit and tax credit purposes.

SCHEDULE B- ALTERNATIVE MINIMUM TAX The Maine Corporate alternative minimum tax is repealed for tax years beginning on or after January 1, 2018.

9 MAINE CORPORATE INCOME TAX - 2018 FORM 1120ME SCHEDULE C - TAX CREDITS INSTRUCTIONS Tax Credit Worksheets. Except for the minimum tax credit, Line 1i. High-Technology Investment Tax Credit: For tax years which is calculated on Schedule D, a completed tax credit worksheet beginning on or after January 1, 2016, this credit is available only must be attached for each credit claimed. Tax credit worksheets may for unused credit amounts carried forward from prior years. Use the be downloaded from the MRS web site. Go to www.maine.gov/ credit worksheet to calculate the amount for this line. 36 M.R.S. § revenue/forms and select Worksheets for Tax Credits. Worksheets 5219-M. may also be ordered by calling (207) 624-7894. Line 1j. Minimum Tax Credit: If the entity paid Maine alternative Amount Used. For each credit, enter in the appropriate space minimum tax in previous years, a minimum tax credit may be the amount of credit claimed for this year. The total amount of non- available. See Schedule D and 36 M.R.S. § 5203-C(4). refundable credits on line 1s that may be used this year cannot exceed the tax liability on Form 1120ME, line 7c. Any amount Line 1k. Employer Family and Medical Leave Credit: An employer of refundable credits on line 2c that exceeds the tax liability that paid wages to employees based in Maine who were on family or on Form 1120ME, line 7c, less other applicable credits will be medical leave during the taxable year may be eligible to claim this refunded to the taxpayer. credit. 36 M.R.S. § 5219-UU. Amended Returns: This schedule must be completed even if the Line 1l. Credit for Educational Opportunity: An employer that pays numbers are not changing from the original return, or as previously student loans for a qualifying employee who received an associate, adjusted. bachelor’s or graduate degree may be eligible for this credit. 36 M.R.S. § 5217-D. Non-refundable Credits Line 1a. Seed Capital Investment Tax Credit: If the taxpayer Line 1m. Wellness Program Credit: An employer with 20 or invested in a business that it does not own, a credit may be available fewer employees that incurred expenses for developing, instituting through the Finance Authority of Maine. 36 M.R.S. § 5216-B. and maintaining a wellness program may qualify for this credit. 36 M.R.S. § 5219-FF. Line 1b. Jobs and Investment Tax Credit: For tax years beginning on or after January 1, 2016, this credit is available only for unused Line 1n. Certifi ed Visual Media Production Credit: If the business credit amounts carried forward from prior years. Unused credit produced a movie or other type of media production in Maine, it may amounts may be carried forward for up to six years from the tax year qualify for the credit, certifi ed through the Department of Economic a credit was claimed. The total credit carryforward applied in any one and Community Development. 36 M.R.S. § 5219-Y. tax year may not exceed $500,000. 36 M.R.S. § 5215. Line 1o. Biofuel Production Tax Credit: For tax years beginning on Line 1c. Employer-Assisted Day Care Credit: For tax years or after January 1, 2016, this credit is available only for unused credit beginning on or after January 1, 2016, this credit is available only amounts carried forward from prior years. Use the credit worksheet for unused credit amounts carried forward from prior years. Unused to calculate the amount for this line. 36 M.R.S. § 5219-X. credit amounts may be carried forward for up to 15 years from the Line 1p. Maine Fishery Infrastructure Credit: If the entity invested tax year the credit was claimed. The credit carryforward is limited to in, or contributed to, a public fi shery infrastructure project, it may be the taxpayer’s Maine tax liability excluding the alternative minimum eligible for this credit. Eligibility is determined by the Department of tax. 36 M.R.S. § 5217. Inland Fisheries and Wildlife. 36 M.R.S. § 5216-D.

Quality Child Care Investment Credit: For tax years beginning on Line 1q. Credit for Disability Income Protection Plans: If an or after January 1, 2016, this credit is available only for unused credit employing unit sponsors a qualifi ed income protection plan, the amounts carried forward from prior years. The credit carryforward employing unit may be eligible for the credit. 36 M.R.S. § 5219-OO. is limited to the taxpayer’s Maine tax liability. 36 M.R.S. § 5219-Q. Line 1r. Other Credits: Enter the amount of the allowable Maine Life Line 1d. Employer-Provided Long-Term Care Benefi ts Credit: For and Health Insurance Guaranty Association credit. Attach supporting tax years beginning on or after January 1, 2016, this credit is available documentation. See 24-A M.R.S. § 4621(2-A). only for unused credit amounts carried forward from prior years. Line 1u. Allowable Nonrefundable Credits: Total nonrefundable Unused credit amounts may be carried forward for up to 15 years credits cannot exceed the amount of Maine Corporate Income Tax from the tax year the credit was claimed. The credit carryforward is due plus any credit recapture amounts for the tax year. Combine limited to the taxpayer’s Maine tax liability excluding the alternative this amount with the amount on line 2c and enter the total on Form minimum tax. 36 M.R.S. § 5217-C. 1120ME, line 8c. Line 1e. Pine Tree Development Zone Regular Tax Credit: A new or expanded business operating in Maine that has been certifi ed Refundable Credits through the Department of Economic and Community Development Line 2a. Historic Rehabilitation Credit: If qualifi ed expenditures may qualify for this credit, 36 M.R.S. § 5219-W. related to the rehabilitation of historic property in Maine were incurred, the taxpayer may qualify for this credit. 36 M.R.S. § 5219-BB. Line 1f. Maine Capital Investment Credit: If the taxpayer invested in property, except for qualifi ed improvement property, in Maine that Line 2b. New Markets Capital Investment Credit: The holder of a was eligible for the federal bonus depreciation, the entity may be qualifi ed equity investment certifi cate issued by the Finance Authority eligible for this credit. 36 M.R.S. § 5219-NN. of Maine may be eligible for this credit. 36 M.R.S. § 5219-HH. Line 1g. Research Expense Tax Credit: If the business invested in For each credit claimed, a complete tax credit worksheet must research, it may qualify for this credit. 36 M.R.S. § 5219-K. be attached showing all calculations. Tax credit worksheets and instructions are available at www.maine.gov/revenue/forms; select Line 1h. Super Credit for Substantially Increased Research and Worksheets for Tax Credits. Development: For tax years beginning on or after January 1, 2014, this credit is available only for unused credit amounts carried forward from prior years. Use the credit worksheet to calculate the amount for this line. 36 M.R.S. § 5219-L. This page revised March 2021 10 MAINE CORPORATE INCOME TAX - 2018 1120ME SCHEDULE X - AMENDED RETURN INFORMATION INSTRUCTIONS This schedule may only be used to amend a 2018 Maine tax return

Purpose of schedule: A Maine amended return must be fi led when after the date the original return was fi led, or within three years after there are changes or corrections that aff ect the taxpayer’s liability. the date the tax was paid, whichever is later. This time limit does not apply when the Internal Revenue Service makes an adjustment Form to use: Use Form 1120ME and Schedule X to amend Form that aff ects the taxpayer’s liability. 1120ME returns for tax years 2016 and later. To correct Form 1120ME or Form 1120A-ME returns for years 1991 through 2015, Line Instructions use a Form 1120X-ME applicable to the appropriate year. For years prior to 1991, use Form 1120ME for the year(s) prior to 1991 that Line 1. Reason for change: Check the appropriate box to identify are being amended and print or type “amended” in the upper left the reason for fi ling this form: corner of the form. To obtain a form for the year being amended, go to www.maine.gov/revenue/forms or call 207-624-7894. a) If an Internal Revenue Service audit change, attach a copy of the federal audit; Attachments: Attach copies of federal Form 1120X or the Internal b) If a net operating loss, attach a copy of federal Form 1139; Revenue Agent report to support changes shown on Maine Form c) If an amended federal Form 1120X, attach a copy of the federal 1120ME, Schedule X. In the event of a net operating loss, attach amended return; a copy of federal Form 1139 for each year being amended. For all d) If an accounting change, attach approval of acceptance from amended returns, Schedules A through D must be completed, even the Internal Revenue Service. if the amounts have not changed from the original return. In all cases, attach a detailed written explanation of the requested Unitary groups: For a unitary group fi ling a combined Maine return, changes. the federal taxable income to be reported on the Maine corporate return, line 1 is the federal taxable income under the laws of the Line 2. Provide detail to support changes made on amended Form United States for the unitary group (MRS Rule 810). This is the 1120ME and all applicable schedules. Only include information on amount shown on Form CR, line 20 as amended. All unitary business lines that changed from the original return or the return as most groups must complete Form CR. recently amended.

Combined Reports: Refer to the instructions for Form CR and Column A: Enter the line number adjusted. combined reporting. A copy of Form CR must be attached to amended Form 1120ME if the entity is a member of a unitary business Column B: Enter the amounts from the return as originally fi led or group, even if not changes are being made. most recently amended. If the return was adjusted or audited by the State of Maine, enter the amounts as last adjusted. When to fi le: Amended Maine income tax returns must be fi led Column C: Enter the net increase or net decrease for each line that within 180 days of the fi nal determination of the change or correction is changed. Use a minus sign to the left of the number to indicate of the fi ling of the federal amended return or Internal Revenue Agent a decrease. report. File an amended Form 1120ME along with Schedule X only after having fi led an original return. Column D: Combine the amounts in column b and column c and enter the result in column d. Generally, to receive a refund of taxes paid, an amended Maine return and all applicable schedules must be fi led within three years

NOTE: For tax years 2005 and later, the gross tax amount must be apportioned to determine Maine liability. For tax years 2007 and later, the Schedule A apportionment calculation is based completely on sales. Be sure to select the correct amended form for the year being amended. For more information, see instructions for Form 1120ME, lines 6 and 7a.

11 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME FORM CR-UNITARY BUSINESS COMBINED REPORTING WHO MUST FILE A COMBINED REPORT (FORM CR)? Taxable questionnaire is available at www.maine.gov/revenue/forms. Select corporations that are members of an affi liated group engaged in a Corporate Income Tax under the Income/Estate Tax category. Also multi-corporate unitary business must fi le a combined report based see MRS Rule 810 for additional information. on the federal taxable income of the unitary business. See MRS Rule 810 for more information on combined reporting. Captive insurance RETURNS AND PAYMENTS: Corporate members of unitary companies are subject to corporate income tax and, therefore, must businesses may fi le a single combined return or separate corporate be included in the combined report. Corporations that are part of returns. A single combined return, if elected, must be fi led in the a unitary business, but are not required to fi le a federal income tax name of the parent corporation if the parent is a member of the unitary return, are excluded from the combined report. business and has nexus with Maine. If there is no parent company or the parent company is not a member of the unitary business or The combined report must show which corporate members have does not have nexus with Maine, the unitary business must choose nexus with Maine and it must include, both in the aggregate and by a Maine taxpayer member to fi le the return. Once selected, the fi ling corporation, the federal taxable income, allowable adjustments, state member must remain the same in subsequent years unless changes modifi cations provided by 36 M.R.S. § 5200-A, and sales, payroll in that member’s ownership or nexus occur. A unitary business that and property values in Maine and everywhere. will be fi ling a single return must make payments, including estimated payments, under the corporate name and FEIN of the corporation Maine defi nes affi liated group to mean a group of two or more that will be fi ling Form 1120ME for the year. Unitary members who corporations in which more than 50% of the voting stock of each have nexus with Maine may fi le separate returns based on the member corporation is directly or indirectly owned by a common combined report of the unitary business. A copy of the combined owner or owners, either corporate or non-corporate, or by one or report (Form CR) must be attached to each of the separate returns. more of the member corporations. The apportionment factor of the unitary business is then used to Maine corporate income tax of a unitary business is determined compute the Maine income tax of the individual member fi ling a by apportioning to Maine the gross tax of the unitary business. Maine separate return. A unitary member that will be fi ling a separate utilizes a single sales factor apportionment formula. return must make payments, including estimated payments, using its corporate name and FEIN. A UNITARY BUSINESS is one that is characterized by unity of ownership, functional integration, centralization of management and Whether fi ling separately or as a group, the Maine tax liability economies of scale. The cumulative eff ect of these characteristics must be calculated for all unitary members together. If filing is analyzed to determine if affi liated businesses are unitary. separately, each member’s tax liability is determined based on that member’s share of the total liability. UNITY OF OWNERSHIP is generally demonstrated when 50% or more of the voting stock is owned directly or indirectly by a common The lower, preferential tax rates may be applied to a separate owner or owners, either corporate or non-corporate, or by one or fi ler if agreed to by the entire unitary group. The remaining tax liability more of the member entities. is then applied to the rest of the unitary group. A schedule showing the income tax assigned to each fi ler must be submitted with each CENTRALIZED MANAGEMENT is achieved when directors, return. Any tax credits generated by a taxable corporation engaged offi cers and/or other management personnel jointly participate in the unitary business must be applied against the Maine income in management decisions that aff ect the respective companies. tax liability of that corporation only, unless otherwise permitted by Centralized management still exists when day-to-day management law. responsibilities are decentralized, as long as the overall strategy of the whole group is aff ected centrally. Other indicators of centralized DIFFERING YEAR-END DATES: Members of a unitary business management include managing to ensure that the business with diff ering year-end dates must fi le using the fi ling member’s segments are operated for the benefi t of the entire group and not taxable year to determine the adjusted federal taxable income of the just for their own individual interest, transferring knowledge and unitary business. If the precise amount of a unitary member’s income expertise among the segments, adhering to common standards of can be readily determined from the books for the months involved professionalism, profi tability and/or ethical practices and transferring in the fi ling member’s taxable year, those actual amounts are to be or rotating offi cers or other management employees among the used. In the absence of a precise determination, the income of a business segments. unitary member must be converted to conform to the taxable year of the fi ling member on the basis of the number of months falling FUNCTIONAL INTEGRATION refers to transfers between, or pooling within the applicable tax year. For example, if the fi ling member among, business segments that signifi cantly aff ect the business operates on a calendar year and a unitary member includable in operations of the segments. There is no specifi c type of functional the combined report operates on a fi scal year ending on February integration that must be present. Facts suggesting the presence of 28th, it is necessary to assign 10/12 of that member’s income from functional integration should be analyzed for their cumulative eff ect the current taxable year and 2/12 of the income from the preceding and not in isolation. Functional integration can be illustrated by: taxable year in order to arrive at a full twelve months’ income to be common marketing; intercompany sales; exchanges or transfers included in the combined report (this method may be used only if of products, services or intangibles; common distribution systems; the return can be timely fi led after the member’s taxable year ends). and common purchasing. Alternatively, all of the income from the unitary member’s taxable ECONOMIES OF SCALE exist when companies interact to achieve, year ending during the taxable year of the fi ling member may be or have the potential to achieve, a decrease in the cost of production used. Whichever method for calculating adjusted federal taxable or in the cost of administrative functions due to the increase in size income is used, that method must be used for all years that the of the interaction. Economies of scale may exist from the inherent unitary member must fi le. Once the combined taxable income of the cost savings that arise from the presence of functional integration unitary business is determined on the basis of the fi ling member’s or centralization of management. tax year, the apportionment factor must be computed on the basis of the same tax year. A unitary determination is made by reviewing all the business activities of an affi liated group. A fl ow of value arising from these For more information on unitary business and combined activities is indicative of multi-corporate unity. To help determine reporting, see MRS Rule 810. Go to www.maine.gov/ whether a business operates in a unitary manner, a unitary business revenue/rules. 12 MAINE CORPORATE INCOME TAX 2018 FORM 1120ME COMBINED REPORT FOR UNITARY MEMBERS (FORM CR) INSTRUCTIONS

The combined report, when applicable, must be fi led with Form 1120ME, as originally fi led or amended. This report must be accompanied by an affi liation schedule (federal Form 851 for consolidated fi lers is acceptable) listing name, federal ID number and corporate activity of all members of the affi liated group, both unitary and non-unitary.

A. PURPOSE OF FORM: C. COLUMN INSTRUCTIONS:

NOTE: Only unitary business group members are to be included Column 1. Check this box if the corporation listed in column 3 has on this form. Do not include affi liated non-unitary members on Form nexus with Maine. See MRS Rule 808 for more information on Maine CR. nexus. Form CR is used to calculate the taxable income under the laws Column 2. Check this box if the corporation in column 3 fi les sales of the United States (36 M.R.S. § 5102(8)) of a unitary business. tax returns with Maine. Taxable income under the laws of the United States of a unitary business is: Column 3. Enter the name and federal identifi cation number of each member of the unitary business. (a) Separate federal taxable income as defi ned under federal consolidated regulations for each member of a unitary business that Column 4. Enter the separate federal taxable income under U.S. is a member of a single federal consolidated fi ling; plus Treasury Regulation § 1.1502 of each member listed in column 3 that (b) Separate federal taxable income as defi ned under federal was part of a federal consolidated return (member’s share of Form consolidated regulations for members of a unitary business that are 1120, line 28). This information can be obtained from the supporting members of other federal consolidated fi lings; plus statement fi led with federal Form 1120 for consolidated returns. Attach (c) Federal taxable income from the federal returns of the unitary a copy of the supporting statement from the consolidated return. members that are not members of a federal consolidated group; plus (d) Adjustments for certain intercompany transactions between Column 5. Enter in column 5 each corporation’s share of everywhere members of the unitary business. & Maine sales of the unitary business. Exclude sales of tangible personal property into a state where the taxpayer is not taxable. Do B. COMBINED REPORTING: not, however, exclude sales if any affi liate with which the taxpayer conducts a unitary business, is taxable in that state. Enter the line Corporations with taxable income under the laws of the United 13 totals (after applying adjustments and eliminations on line 12) States that are members of an affi liated group engaged in a unitary on Schedule A, line 1. business must file a combined report. Corporations that are members of a unitary business but are not required to fi le a federal D. LINE INSTRUCTIONS: return must be excluded from the combined report. This includes those corporations not required, but electing, to fi le a federal tax Line 7. Enter the total for column 4. return. Line 8. Enter any adjustments or eliminations, deferrals and other “Affi liated group” means a group of two or more corporations modifi cations allowed under federal law and regulations. Include any of which more than 50% of the voting stock of each member intercompany transactions between corporations listed on this report corporation is directly or indirectly owned by a common owner or if those transactions resulted in gains or losses. For transactions owners, either corporate or non-corporate, or by one or more of the between unitary business members not part of the same consolidated member corporations. 36 M.R.S. § 5102(1-B). A “unitary business” fi ling, enter adjustments allowed under MRS Rule 810.03(D). Attach is a business engaged in activity that is characterized by unity of a worksheet that details adjustments claimed on line 8. ownership, functional integration, centralization of management and Line 9. Enter allowable special deductions for the unitary business economies of scale. 36 M.R.S. § 5102(10-A). (from federal Form 1120, line 29b). These deductions must be All corporations required to fi le federal returns that are part of a aggregated and adjusted, if necessary, in a manner consistent with unitary business are required to be included in the combined report federal consolidated fi ling requirements. of any taxable corporation with Maine nexus, even if the affi liated Line 10. Enter the allowable NOL deductions for the unitary business. corporation has no nexus with Maine. See MRS Rule 810.09 (allocation and uses of net operating losses). Line 11. Enter the total from column 4 minus the deductions on lines 8 through 10. If fi ling a single return, enter on this line and on Form 1120ME, page 1, line 1. This is the taxable income under the laws of the United States of the unitary business.

See MRS Rule 810 for more information.

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